The Federal Reserve’s current choice to hold interest rates steady is turning out to be the proverbial pause that is refreshing the stock market.
The longer it keeps them at the current level, the better it could be for investors.
The S&P 500 is up more than 13% since the Fed’s latest rate increase on July 26. That is a 288-day pause…and counting
Traders are pricing in slim odds of a rate cut at the Fed’s June 12 meeting and only a little more than 30% probability of easing when policymakers gather at the end of July.
The most likely scenario, as of now, is that the Fed makes a move to lower rates on Sept. 18.
According to a recent report by LPL Research, long pauses have been good for stocks.
“The only rate pause that was longer than the current one was in 2006–2007
which lasted for 446 days and generated a gain of 22.1%,” said LPL chief equity strategist Jeff Buchbinder in the report.
While that pause preceded the 2008-2009 financial crisis, periods of steady rates generally haven’t been followed by economic and stock market disasters